In the United States, small businesses are more than just the backbone of the economy—they’re the heart and soul of communities and a driving force for innovation. According to the U.S. Small Business Administration, small businesses make up a staggering 99.9% of all U.S. businesses and employ nearly half of the private-sector workforce. Despite the monumental role they play in the economy, starting a small business is no small feat. The path from conceptualization to launch is often fraught with challenges, including planning, funding, and execution.
If you’re an aspiring entrepreneur, you may find the prospect of starting a small business both exhilarating and a little unnerving. If this is you, don’t worry! This article breaks down the complex process into 10 simple, actionable steps. From initial brainstorming and market research to securing finances and opening your doors, we’ll guide you through the maze of decisions and tasks that lie ahead. By following this roadmap, you’ll not only be better equipped to launch your small business, but also more likely to build a venture that lasts.
Types of Small Businesses
Small businesses come in various shapes and sizes, each with its unique challenges and opportunities. Here are some of the most common types of small businesses.
This is the simplest form of business, owned and operated by a single individual with no distinction between the owner and the business. The owner is responsible for all debts, but all profits go directly to him or her.
In a partnership, two or more individuals come together to run a business. Profits and liabilities are shared according to the terms laid out in a partnership agreement.
A corporation is a separate legal entity from its owners and is subject to more complex regulations and tax requirements. Small corporations are typically known as “S corporations,” which allows income to flow through to the owner’s personal income without being subject to corporate tax rates.
Limited Liability Companies (LLCs)
An LLC blends aspects of partnerships and corporations, providing the liability protection of a corporation with the tax benefits and simplicity of a partnership.
Franchising allows entrepreneurs to operate their own business under the banner of an existing brand. While this comes with certain rules and a share of profits going to the parent company, it also offers the advantage of a recognized name and support in operations and advertising.
In today’s digital age, many small businesses operate entirely online. These can include e-commerce stores, service providers, and digital product businesses.
Home-Based businesses are run from the owner’s home and can be any of the types listed above. With low overhead costs, they are an appealing option for many entrepreneurs.
These enterprises provide services rather than goods. Examples include salons, repair shops, home services, and consulting firms.
Retail and Restaurants
These businesses sell products directly to consumers, and they can exist in a variety of formats—brick and mortar stores, online shops, or both.
These companies offer products or services directly to other businesses. This might include manufacturers, wholesalers, and various types of consultancies.
Understanding the type of small business you’re interested in starting will dictate many of your future decisions, from licensing requirements to your business model to the size and scope of your operation. Remember that the type of business you start should align not just with your business objectives, but also your personal goals and lifestyle.
What Do You Need to Start a Small Business?
Starting a small business involves more than just a brilliant idea and a go-getter attitude. It requires thoughtful planning, resources, and a range of key elements to transform your vision into a viable enterprise. Below is a checklist of essential items that aspiring entrepreneurs should consider:
Your business begins with an idea. It’s essential to have a concept that solves a problem or fulfills a need in a unique or innovative way.
A well-crafted business plan outlines your business goals and the strategy you will use to accomplish them. This document is crucial, especially if you plan to seek financial support from investors or a financial institution.
Understanding your target market is fundamental. Market research will help you identify customer needs, market size, and your competition.
Decide on the type of business structure that best suits your needs, such as a sole proprietorship, partnership, corporation, or LLC. Your choice will have implications for how you report income, your level of personal liability, and how you can raise capital.
Business Name and Registration
Choose a name that reflects your brand and then check its availability. Once chosen, you’ll need to register it and acquire the necessary licenses and permits.
Your business location, whether physical or online, can significantly impact visibility, accessibility, and sales. Choose wisely when selecting a physical location or URL address.
Capital is required to start and operate your business. You’ll need to figure out your start-up costs and ongoing expenses to see how much financing you’ll need.
Bank Account and Accounting Software
Open a separate bank account strictly for business finances. This makes tracking business expenses easier and is essential for tax purposes. Additionally, invest in reliable accounting software to manage your finances efficiently.
Business Website and Social Media Presence
In today’s digital age, an online presence is essential for all businesses. A professional website and active social media accounts can be valuable tools for attracting customers.
Suppliers and Inventory
If your business involves selling physical products, you’ll need to decide where you’ll get your inventory and how you’ll manage it.
Sales and Marketing Plan
Have a robust sales and marketing plan to attract customers. This could involve advertising, promotions, public relations, and a sales strategy.
Team and Advisors
If you can’t operate your business on your own, you’ll need to hire employees. Even solo entrepreneurs can benefit from a team of advisors for specialized guidance.
Consult a lawyer to make sure you’re following all local, state, and federal laws. This includes employment laws if you’re hiring staff.
Business Tools and Technology
Invest in essential business tools and technology like computers, software, point-of-sale (POS) systems, and other equipment specific to your business type.
By ensuring that you have each of these elements in place or in progress, you’ll be setting the stage for a successful venture. If you decide to go the franchising route, you’ll likely have most of these elements included through the franchisor, making your day-to-day operations more seamless and allowing you to get your business off the ground faster.
How to Start a Small Business in 10 Steps
Starting a small business is a journey filled with important decisions. To help guide you through the journey toward entrepreneurship, here are 10 actionable steps to take:
1. Identify Your Business Idea
A solid business idea serves as the foundation of your enterprise. It should solve a problem, fulfill a need, or offer something the market wants. To do this, identify gaps in the market, consider your passions and skills, examine trends and market needs, and seek feedback from potential customers.
2. Write a Business Plan
A business plan outlines your business objectives, target market, revenue projections, marketing strategies, and operational plan. Your business plan should include the following:
- Executive Summary: Briefly describe your business.
- Business Description: Explain the problem your business solves.
- Market Analysis: Provide research on your market and competition.
- Organization and Management: Describe your business structure and team.
- Service or Product: Detail what you’re offering.
- Marketing and Sales: Outline your strategies.
- Funding Request: Specify your financial needs.
- Financial Projections: Offer projections for the next 5 years.
3. Secure Funding
You’ll likely need to secure funding to start your small business. When approaching investors, have a pitch ready, offer a comprehensive business plan, and be prepared to discuss or negotiate equity or interest rates. Here are a few ways you can obtain financing for your business venture:
- Bootstrapping: Use your savings or revenue.
- Venture Capital: Investors provide large sums for equity.
- Small Business Loans: Traditional bank loans.
- Crowdfunding: Use platforms like Kickstarter.
4. Choose a Business Location
Choosing the right location for your business is critical. Take into consideration the visibility and accessibility of your storefront, the customer demographics, competition in the area, rent and utility costs, and any legal or zoning requirements.
5. Form a Legal Entity and Register with the State
Follow these steps to officially form a legal entity and register your business with the State.
Steps to Register:
- Choose and register your business name (“Doing Business As”)
- File necessary paperwork with your Secretary of State
- Acquire federal and state Employee Identification Numbers, or EINs
6. Get Necessary Licenses and Permits
Before you can begin operating your business, you’ll need to obtain and necessary licenses and permits. Be sure to research federal, state and local requirements and apply early. Also, consider what insurance coverage you may need to obtain. This could include but is not limited to general liability insurance, property insurance, worker’s compensation, and business interruption insurance.
7. Apply for EIN or Tax ID
Be sure to apply online for your EIN or Tax ID. To do this:
- Visit the IRS website
- Complete the online EIN application
- Review and submit your form
- Receive your EIN instantly
8. Open a Business Bank Account
Now that you have all the necessary documentation, you can open a business bank account. Do your research and choose a bank that meets your needs. Bring the necessary documents including your EIN and business license to the appointment. If you plan to apply for financing, there are a few additional requirements you’ll need to have prepared.
Apply for Financing:
- Personal credit history review
- Business plan submission
- Financial projections
9. Set Up Your Business Infrastructure
Now you’re ready to set up your business for operation! Whether you’re leasing a storefront or operating a home-based business, you’ll need to get a designated space ready for work. This stage also includes purchasing any inventory or equipment, obtaining any training or education, and getting other systems and processes in place. If you plan to hire immediately, you’ll also want to post job openings and start interviewing candidates.
10. Market Your Business
Finally, you’ll need to market your business to get the word out that you’re open for business. Effective marketing is key to attracting and retaining customers, so it’s paramount that you don’t skip this step. Consider these strategies to help you get started:
- Advertise on social media
- Invest in SEO
- Try out pay-per-click (PPC) advertising
- Create a professional website
- Stay active social media platforms
- Implement email marketing
By following these 10 steps, you’ll be well on your way to establishing a small business that not only survives but thrives! Each step is a milestone in the entrepreneurial journey, leading you closer to the realization of your business dream.
How to Start Payroll for Small Business
Once your small business is up and running and you’re ready to hire employees, one of the most crucial systems to set up is payroll. A well-managed payroll system ensures that your employees are paid accurately and on time, and it helps you comply with federal, state, and local tax obligations.
Basic Steps to Start Payrol
1. Apply for an Employer Identification Number (EIN)
Before you can start payroll, you’ll need an Employer Identification Number (EIN) from the IRS, if you haven’t already obtained one.
2. Check State and Local Requirements
Each state has its own set of payroll tax requirements. Make sure to understand your state’s guidelines, as well as any local or municipal tax obligations.
3. Choose a Payroll Schedule
Decide how often you’ll pay your employees—weekly, bi-weekly, or monthly. Different jobs and industries have different norms, and state laws may impose minimum pay periods.
4. Create Employee Records
Gather necessary information from each employee, including W-4 forms for tax withholding, and identification verification.
5. Calculate Gross Pay
Determine the gross pay for each employee based on hours worked, salary, and any additional compensation like overtime, bonuses, or commissions.
6. Calculate Deductions
Subtract federal, state, and local income taxes, along with Social Security, Medicare, and any other deductions like retirement contributions or health insurance.
7. Issue Payments
Pay your employees by your chosen method, such as direct deposit, check, or payroll cards.
8. File and Pay Taxes
Report your payroll taxes to the IRS and your state’s tax department. This usually involves filing specific forms and making tax payments.
9. Maintain Records
Keep accurate records of all payroll transactions, tax filings, and payments for a minimum period as required by law, usually 4 years.
10. End-of-Year Reporting
At the end of the tax year, you’ll need to issue W-2 forms to your employees and file additional tax forms with the IRS.
How to Pay Employees
- Direct Deposit: This is the most common and convenient method, where the net pay is transferred directly into the employees’ bank accounts.
- Paper Check: Less common nowadays but still used, especially for temporary or part-time workers.
- Payroll Cards: These are prepaid cards that can be loaded with an employee’s wages each pay period.
Payroll for Self-Employed
If you’re self-employed, the payroll process is a bit different. Instead of receiving a regular salary, you’ll likely draw income from the business profits. However, you still have to pay self-employment taxes, which include Social Security and Medicare taxes.
Steps for Self-Employed Payroll
- Calculate Earnings: Keep track of your income and expenses.
- Pay Quarterly Taxes: Unlike employees who have taxes withheld, self-employed individuals generally need to make estimated tax payments each quarter to the IRS.
- Annual Tax Return: At the end of the year, you’ll file a Schedule C form along with your regular tax return to report your income and expenses.
- Form SE: Use this form to calculate your self-employment taxes, which you’ll also file with your annual tax return.
Managing payroll accurately is vital for the success of your business and the satisfaction of your employees. Whether you choose to handle payroll yourself or use a payroll service, understanding the basics will help you navigate this essential business function efficiently.
Franchise Spotlight: Start a Home Inspection Business with WIN Home Inspection
If you’re still searching for a promising business idea, consider the high-demand, low-overhead world of home inspection. This industry not only offers excellent income potential, but also provides the flexibility that so many entrepreneurs crave. And when it comes to home inspection business, WIN Home Inspection stands out as the industry leader.
Why Choose WIN Home Inspection?
- Constant Demand: As Americans continue to buy and sell homes, the need for reliable home inspections remains in constant demand.
- Low Start-up Costs: Unlike other businesses that require a sizable investment in inventory or a physical location, home inspection businesses can be operated with relatively low initial expenses.
- Flexibility: Being a home inspector means you can often set your hours and appointments, providing a work-life balance that’s hard to find in other industries.
What Makes WIN the Best?
- #1 Home Inspection Franchise: WIN Home Inspection has been ranked as the #1, fastest growing, and ‘best of the best’ home inspection franchise in the U.S. by Entrepreneur in 2023.
- Comprehensive Training and Certification: WIN offers in-house training and certifications for 35+ essential services, ensuring that you are well-equipped to meet the demands of the market and allowing you to generate multiple income streams year-round.
- End-to-End Marketing Support: With WIN, you don’t have to worry about how to attract customers. We provide comprehensive end-to-end marketing support at no additional cost, making it easier for you to focus on your core services and continuously generate new leads.
- Ongoing Support: WIN’s relationship with its franchise owners doesn’t end once the business is up and running. We have the largest support team in the industry to help you with virtually every aspect of your business and offer continued support to help you navigate the complexities of running a successful home inspection business.
So, if you’re looking for a business opportunity that offers high demand, low start-up costs, and unparalleled support, WIN Home Inspection is an option worth exploring. The steps to business ownership might seem daunting, but with the right partner (like WIN!) you’re already several strides closer to success.
Starting a small business is an exhilarating journey filled with opportunities and challenges. We’ve walked you through the 10 key steps to launching your venture—from identifying your business idea, crafting a business plan, securing funding, and all the way to setting up payroll. While each step requires careful thought and execution, the most important thing is to take the first step. With the right plan, support, and tenacity, your entrepreneurial dream can become a reality.